Ask Price The price at which the currency or instrument is offered. *Ask is the lowest price acceptable to the buyer.
American Option An option which may be exercised at any valid business date throughout the life of the option. Compared with a European option that can only be exercised on a specific date.
Arbitrage A risk-free type of trading where the same instrument is bought and sold simultaneously in two different markets in order to cash in on the difference in these markets.
Around Used in quoting forward "premium / discount". At Best An instruction given to a dealer to buy or sell at the best rate that is currently available in the market.
At or Better An order to deal at a specific rate or better.
At the Price Stop-Loss Order A stop-loss order that must be executed at the requested level regardless of market conditions.
Average Rate Option A contract where the exercise price is based on the difference between the strike price and the average spot rate over the contract period. Sometimes called an "Asian option".
Back to Back (1) Transaction where all the obligations and liabilities in one transaction are mirrored in a second transaction. (2) Transaction where a loan is made in one currency in one country against a loan in another country in another currency. Base Currency The currency in which the operating results of the bank or institution are reported. Base Rate A term used in the UK for the rate used by banks to calculate the interest rate to borrowers. Top quality borrowers will pay a small amount over base. Basis The difference between the cash price and futures price. Basis Point One per cent of one per cent. Bear An investor who believes that prices are going to fall. * Bear Market A market in which prices decline sharply against a background of widespread pessimism (opposite of Bull Market). Bid Price The price at which a buyer has offered to purchase the currency or instrument. Bid is the highest price that the seller is offering for the particular currency at the moment; the difference between the ask and the bid price is the spread. Together, the two prices constitute a quotation; the difference between the two is the spread. The bid-ask spread is stated as a percentage cost of transacting in the foreign. Binary Options A binary "call" (or "step up") is like a standard European call option except that the pay off at expiry is fixed at one unit of the counter currency, if the call expires in the money. Black-Scholes Model An option pricing formula initially derived by Fisher Black and Myron Scholes for securities options and later refined by Black for options on futures. It is widely used in the currency markets.
Bretton-Woods The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s. The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar. Broker An agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. Brokers are agents working on commission and not principals or agents acting on their own account. In the foreign exchange market brokers tend to act as intermediaries between banks bringing buyers and sellers together for a commission paid by the initiator or by both parties. There are four or five major global brokers operating through subsidiaries affiliates and partners in many countries. Bull A person who believes that prices will rise. Bull Market A market characterized by rising prices. Buyer/Taker The purchaser of an option, whether a call or put option. The buyer may also be referred to as the option holder. Option buyers receive the right, but not the obligation, to enter a futures/securities market position. * Cable A term used in the foreign exchange market for the US Dollar/British Pound rate. Call An option that gives the holder the right to buy the underlying instrument at a specified price during a fixed period. Call Option A call option confers the right but not the obligation to buy stock, shares or futures at a specified price. CBOE Chicago Board Options Exchange. Central Bank A central bank provides financial and banking services for a country's government and commercial banks. It implements the government's monetary policy, as well, by changing interest rates. It is normally the issuing bank and controls bank licensing, and any foreign exchange control regime. CFTC The Commodity Futures Trading Commission, the US Federal regulatory agency for futures traded on commodity markets, including financial futures. Closed Position A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency. Commission The fee that a broker may charge clients for dealing on their behalf. Contract An agreement to buy or sell a specified amount of a particular currency or option for a specified month in the future (See Futures contract). Cross Rate An exchange rate between two currencies, usually constructed from the individual exchange rates of the two currencies, as most currencies are quoted against the dollar. Currency The type of money that a country uses. It can be traded for other currencies on the foreign exchange market, so each currency has a value relative to another. Day Trading A Day-Trading deal is a currency exchange deal which renew automatically every night at 22:00 (GMT time) starting the day the deal was made and until it ends. The deal ends in one of the following events: 1. Termination initiated by you. 2. The day trading rate has reached the Stop-Loss rate (or Take-Profit rate) you predefined. 3. The deal end date. As long as the deal is open, it is charged a renewal fee every night at 22:00 (GMT time). Deal Date The date on which a transaction is agreed upon. Dealer An individual or firm acting as a principal, rather than as an agent, in the purchase and/or sale of securities. Dealers trade for their own account and risk in contrast to the brokers who do trade only on behalf of their clients. European Option An option that can be exercised only on its expiration date rather than before that date. * Exotic A less broadly traded currency.
Whomever came up with the idea for a day trading futures was a genius!